Hyundai to double China sales to $2.2 billion

SHANGHAI -- Hyundai Motor, South Korea's biggest auto maker, should double sales to $2.2 billion from its car-making venture in China this year, despite a downturn in the world's fourth-largest vehicle market.

Xu Heyi, chairman of Beijing Hyundai Automotive Corp., a 50-50 venture set up in 2002, told Reuters on Thursday the company should earn revenue of 18 billion yuan ($2.2 billion) in 2004 and remains on track to move 150,000 vehicles.

Hyundai's partner, Beijing Auto, is pondering an overseas or domestic listing, though it has not yet decided when or where, Xu said.

State media had reported Beijing Auto, a mid-sized domestic carmaker, aimed to float shares in the 2005 second half to try to raise $600 million.

Beijing Auto will next year start making Mercedes luxury sedans in China with another foreign partner, DaimlerChrysler AG.

Hyundai Motor Co., currently fourth in the market, has said previously it wanted to sell 200,000 vehicles in China in 2005. Xu declined to elaborate on that target on Thursday.

Hyundai and its partner sold 110,862 vehicles in China in the first 10 months of this year. Hyundai has said it hoped to sell 60,000 Sonata sedans and 90,000 Avantes in China in 2004.

"We haven't any unsold inventory. In fact, sales are so strong that our dealers are clamoring for product and are paying for it up-front," Xu said. "We'll certainly hit our sales target for the year."

Expansion in China's sedan market, the world's fastest growing last year, began slowing from the second quarter after Beijing moved to cool overheating sectors of its economy.

Those measures squeezed carmakers' margins after major players such as Volkswagen AG and General Motors slashed prices to try to shift more cars.

OVER-INVESTED?

Volkswagen, GM and Toyota Motor Corp. are among foreign players spending over $13 billion to triple capacity to some 6 million cars annually by 2010, hoping to profit from increasingly wealthy Chinese getting behind the wheel.

But last week, the German firm announced it would slash investment in China -- its largest market after Germany -- by 22 percent to 2.1 billion euros ($2.74 billion) over the next two years, citing the market's sharp slowdown.

"The car market illustrates how (the) market mixes cyclical and secular trends and over-invests in China," Morgan Stanley economist Andy Xie wrote in a report on Wednesday.

Hyundai had planned to pump an additional $740 million into its China venture by 2007 to build a second plant that would help ramp up annual capacity to 600,000 units.

Xu declined on Thursday to comment on future investment.

China's car market is expected to grow at just 10-15 percent this year, after doubling to 2 million cars last year, as Beijing tightens its grip on car loans and clamps down on investment. Sedan sales fell 8 percent in October to 178,600.